Republicans unveil measure eliminating taxes on tips after Trump proposal

Republican Reps. Matt Gaetz (Fla.) and Thomas Massie (Ky.) introduced a bill aimed at eliminating taxes on tips after former President Trump said it would be the “first thing” he does if reelected.

The legislation, titled “Tax Free Tips Act of 2024,” aims to eliminate federal income and employment taxes on service workers’ tips.

“As the cost of living continues to rise, the hardworking men and women of the service industry, many of whom may be working a second job to make ends meet, must be allowed to keep every dollar of tip money they earn,” Gaetz said in a statement.

Massie seconded Gaetz’s statement, saying, “Taxing tips is regressive and goes against American tradition.

He added, “But now digital payments allow the government to tax every transaction, even those that historically have not been taxed.”

The announcement comes after Trump said in a Las Vegas rally that hotel workers and other service industry employees should “be very happy” because if he is reelected this fall, “we are going to not charge taxes on tips.”

The former president said taxing tips has been “a point of contention for years and years and years.”

Changes to taxation on tipped income would require Congressional approval. Lawmakers will look at the country’s tax policy next year after Trump’s 2017 tax cut bill expires.

Currently, service workers report their taxes to the IRS, which views tips as a regular taxable income.

GOP senators have praised Trump’s idea, with Sen. Kevin Cramer (R-N.D.) referring to it as “genius.”

Not everyone was excited, though. The Committee for a Responsible Federal Budget estimated cutting tip taxes would lead to a decrease of $150 billion to $250 billion in federal revenues over a 10-year period.